Reserves Used to Repay Debts, Not Defend Naira—CBN Governor

By Adedapo Adesanya

The Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso, has said the recent depletion of the nation’s foreign reserves happened because funds from the purse were used to repay debts owed international creditors.

The Governor gave this explanation at the ongoing International Monetary Fund- World Bank Spring Meetings holding in Washington D.C, the US, on Wednesday, clarifying that the external reserves were not depleted because of the need to defend the Naira as widely speculated.

Nigerians had raised concerns over the significant downturn of the country’s foreign exchange (FX) reserves, plunging by approximately $2.16 billion in 29 days.

Data on the movement of foreign reserves obtained from the CBN website showed that as of April 15, 2024, the FX reserves are now positioned at $32.29 billion, a stark decline from $34.45 billion recorded on March 18, 2024.

The decline, which marks the lowest in six years, marks a decisive end to a period of steady accrual, during which the reserves witnessed a 43-day surge, accruing $1.28 billion between February 5 and March 18, 2024.

However, since it coincided with efforts to stabilise the Naira, there had been criticisms that the Mr Cardoso-led CBN was defending the Naira with the reserves.

In a video monitored by Business Post, Mr Cardoso said this was not the case.

“I want to make this as clear as possible, it is not in our intention to defend the Naira. and as much I have read in the recent few days, some opinions with respect to what is happening with our reserves and if the central bank is defending the Naira.

“What we have seen with respect to the shift in our reserves is the shift that you would find in any country where for example, debts are due and certain payments need to be made and they’re done because that is also part of keeping your credibility intact,” the central banker explained.

He said the depleting external reserves is due to debt repayments, other obligations, and depletion due to the ordinary course of business as seen in other countries, adding that there were no intentions to defend the local currency with the external reserves, as it was counterintuitive.

“So, as long as we have a vibrant currency market, why do we need to go in there to intervene? We don’t need to.

“I can understand that, especially at the outset, there have been little cases where the Bureau du Change (the BDCs), there was a need to get that segment going.

“And small amounts of money, relatively tiny amounts of money, have gone into that to catalyse that happening because it is important that individuals have access to funds to send their kids abroad and do things which are important-health, etc.

“So, it’s important not to keep them out of the mainstay. But in terms of intervention, frankly that’s really not our intention at all,” he quipped.